‘Stage One’ changes to the Retirement Villages Act commence 1 February 2019
WHO SHOULD READ THIS
- Scheme operators of retirement villages.
THINGS YOU NEED TO KNOW
- ‘Stage One’ amendments to the RV Act will commence on 1 February 2019. These changes cover precontractual disclosure (including replacing the PID with new documents), a resident’s right to access village operational documents and procedures to be followed upon a resident’s exit from the village.
WHAT YOU NEED TO DO
- Familiarise yourself with the new provisions and take steps to ensure your new suite of documents is in place by 1 February 2019.
The Housing Legislation (Building Better Futures) Amendment Act 2017 introduced certain changes to the Retirement Villages Act 1999 (Qld) (RV Act), which are being commenced in rolling stages. The immediate changes included an 18 month statutory buy-back provision and new behavioural standards for operators and residents.
The next round of changes (Stage One) will commence on 1 February 2019, and template documents have now been released by the Department of Housing and Public Works (Department). This alert gives a snapshot of the Stage One changes and the steps that operators should take to ensure they are compliant by the start date.
Before entering a village – precontractual disclosure and entry condition reports
New disclosure documents
An operator and prospective resident must not enter into a residence contract unless the operator has given the prospective resident a copy of the following documents at least 21 days before entering into the residence contract:
- a Form 3 Village Comparison Document (Form 3) containing general information about the village (this must also be published on the scheme’s website, included with promotional material and given to a prospective resident within seven days of a request);
- a Form 4 Prospective Costs Document (Form 4) providing more detailed information about the estimated costs for a resident in the village (which must be given to a prospective resident within seven days of a request);
- the residence contract (most commonly a lease); and
- any by-laws for the village.
The Form 3 and Form 4 (together the Disclosure Documents) replace the existing Public Information Document (PID). While the majority of information required for the Disclosure Documents can be taken from the PID, there is additional information required that operators should start to compile. This includes, for example:
- details of current and future development or redevelopment of the village, including details of development approvals and applications (Form 3, item 5);
- estimated ingoing contributions broken down by type of unit (Form 3, item 9.1);
- the past three years of general service charges and maintenance reserve fund contributions (Form 3, item 10.1), as well as the balances of each of the village funds over the past three financial years (Form 3, item 15.1); and
- turnover details for the village, including the number of units vacant at the end of the last financial year, the number of units resold during the last financial year and the average number of months taken to sell a unit over the last three financial years (Form 3, item 14.3).
In preparing the Disclosure Documents, operators should be aware that answers must be inserted in the relevant Disclosure Document (which has limited space) and, unless otherwise specifically allowed, cannot be done by way of attachment or reference to another document. This may create significant difficulties in preparing the Disclosure Documents, particularly for villages with unique models or offerings. More details on the Department’s requirements for completion of the Disclosure Documents can be found in the Department’s Forms instructions sheet.
As the PID will no longer be used, information regarding the statutory funds and the method for calculating relevant contributions will be mandatory content in residence contracts. The maintenance reserve fund contribution will cease to be bundled with the general service charges, though this is unlikely to have any significant impact on operators or residents.
Precontractual disclosure period
Unlike the existing 14 day ‘cooling-off’ period (which remains in place), the RV Act allows a prospective resident to waive their right to the 21 day precontractual disclosure period, via a Form 5 Precontractual Disclosure Waiver signed by the prospective resident and a Queensland lawyer.
There are no ‘transitional’ arrangements for the Disclosure Documents, so logistically operators should take into consideration that any PID signed but not settled by 1 February 2019 will need to be ‘recast’ for the new Disclosure Documents and the 21 day precontractual disclosure period that will strictly apply on and from 1 February 2019.
Entry condition report
A Form 6 Entry Condition Report must also be prepared by the operator, in the presence of the resident (unless they consent in writing to not being present) and must be signed by the operator and given to the resident before they start occupying the unit.
While residing at a village – access to operational documents
Residents (including prospective residents) may request access to ‘operational documents’. These are documents relating to the operation of the village and their disclosure is intended to increase transparency in the relationship between operators and residents. Documents within this scope include:
- the certificate of registration for the village scheme;
- the certificate of title or a current title search for the village land;
- a village site plan and plans showing the location, floor plan and significant dimensions of available units;
- plans of any units or facilities under construction;
- development or planning approvals for any further development of the village;
- annual financial statements and reports presented to previous annual meetings;
- statements of the balance of any statutory village funds for the past three financial years;
- templates of any ‘contracts’ the resident may have to enter into (which will include the residence contract, but may include other documents);
- the village dispute resolution policy;
- by-laws made by the residents under the RV Act; and
- insurance policies and certificates of currency for any insurance relating to the village.
Operators should anticipate that the scheme’s operational documents will be accessed by both residents and potential residents, and should begin to put frameworks in place to ensure requests under the RV Act are appropriately logged and actioned.
When exiting a village – new rules for reinstatement and valuation
Reinstatement and renovation works
Moving forward, ‘reinstatement’ will only require a resident to leave the unit in the same condition as when they entered the unit (fair wear and tear and agreed renovations excepted). The reinstatement work must be undertaken by the resident at their cost prior to vacating the unit, failing which the operator may do the work and recover the costs.
A new concept of ‘renovation’ work has been introduced, being ‘replacements or repairs other than reinstatement work’. The cost of renovation work is to be paid by the resident and operator in the same proportion as they are to share in any capital gain, or are otherwise entirely borne by the operator. Notably, there is no requirement that the renovation work proposed by the operator be agreed by the resident (except in respect of timing).
The changes in respect of reinstatement work and renovation work described above will only apply to residence contracts entered into on or after 1 February 2019. For existing residence contracts, the provisions in those documents (and as existing in the RV Act prior to 1 February 2019) will continue to apply.
Operators will need to ensure they identify the correct reinstatement and renovation provisions applying to a particular residence contract and ensure the correct process is followed. For residence contracts after 1 February 2019, operators should clearly distinguish between ‘reinstatement work’ and ‘renovation work’, given the different cost sharing arrangements for each.
Exit condition report
A Form 7 Exit Condition Report must be provided by the operator to the resident within 14 days of the resident vacating the unit, and the resident must sign or raise any dispute with the report (by marking those items on it).
Resale value and valuation process
For residence contracts terminated on or after 1 February 2019, the resale value must be agreed by the operator and resident within three months, shortened from the existing six months. The agreed resale value must still be reconsidered and agreed at every three month interval.
Finally, there is an updated valuation process where the operator and resident cannot agree on a resale value. In particular, an appointed valuer must request submissions from each party, and both parties will have an opportunity to respond to the other’s submission. Additionally, valuers may request information from operators which must be provided within 14 days of request.
Stages Two and Three
Operators should bear in mind that further changes are to follow throughout 2019 which will bring into force new rules regarding changes to village operations (such as redevelopment and change of ownership) and new standards for residence contracts, financial reports and budgets. The Department’s website contains an indicative time line for consultation and implementation.
Further alerts will be issued as those stages progress.
Operators should start preparing for these changes to ensure they are compliant by 1 February 2019. This will include:
- compiling the information required and preparing the Disclosure Documents;
- amending the residence contract or lease accordingly;
- developing a plan to deal with the new disclosure regime (including tracking the 21 day disclosure period and managing prospective residents’ expectations);
- reviewing and updating websites and promotional material (so that they contain the required disclosure material);
- ensuring arrangements are in place to have entry and exit condition reports properly undertaken by staff in the required timeframes; and
- compiling operational documents so that they are available to be provided upon request.
For further information on any of the issues raised in this alert or for assistance in the transition please contact below authors.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.